Pressure piles on Kingfisher after flight cuts

NEW DELHI Mon Feb 20, 2012 7:33pm IST

1 of 3. Customers stand at a Kingfisher Airlines reservation office at the domestic airport in Mumbai, February 16, 2012.

Credit: Reuters/Vivek Prakash

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NEW DELHI (Reuters) - The Directorate General of Civil Aviation (DGCA) asked Kingfisher Airlines(KING.NS) to explain why it has cancelled a large number of flights since Saturday, while the government again ruled out providing any aid to the loss-making carrier.

Kingfisher has cancelled 32 out of the 240 flights that it operates each day, the airlines said on Saturday, adding that it expected to return to full service within days.

"It is a very serious matter, we recognise it and DGCA has called Kingfisher to find out what's going on, what are their plans and why did they not anticipate the problems and inform DGCA before," Civil Aviation Minister Ajit Singh told reporters on Monday.

Kingfisher said it would submit details on the cancelled flights to the DGCA on Tuesday, and present a plan to restore all operations.

The carrier, controlled by liquor baron Vijay Mallya, said it was forced to cancel flights because tax authorities had frozen its bank accounts, hurting its ability to make operational payments.

"We are in dialogue with the tax authorities to agree a payment plan and get the bank accounts unfrozen at the earliest," it said in a statement on Monday.

The company reiterated that it has not approached the government for a "bail out."

For a graphic, click link.reuters.com/zum46s

Cash-strapped Kingfisher has so far been unable to attract fresh equity. Banks own about a quarter of its shares after the company's debt was restructured early last year.

State Bank of India, the lead lender, has refused to give further loans if the airline does not raise fresh equity.

Singh said it was the government's responsibility to help national carrier Air India, but in case of private airlines such as Kingfisher, it was for the banks to decide whether to provide fresh loans.

"As far as private airlines are concerned, they are talking to banks, and banks will lend them money only if they are confident that their business plans will succeed," Singh said.

The Director General of Civil Aviation E.K. Bharat Bhushan declined to comment when contacted by Reuters.

Meanwhile, passengers have been venting their anger at the airline on social networking websites, blaming the company's inability to provide timely information about the cancelled flights.

Local media reported that about 50 percent of Kingfisher's pilots have quit, despite an assurance by its executives to pay their salaries soon.

"We have adequate numbers of flight crew and cabin crew to operate our schedule of flights," Kingfisher said.

India's airline companies, on course to lose $3 billion for the year ending in March, have struggled with low fares, high jet fuel prices and fierce competition. Five out of six major carriers in India are losing money.

Kingfisher, named after the country's most famous beer, lost 4.4 billion rupees in the fiscal third quarter that ended in December.

Shares of Kingfisher have fallen about 60 percent since the beginning of 2011, while the BSE Sensex has lost about 10 percent in the period.

(Reporting by Anurag Kotoky; Editing by Aradhana Aravindan)

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